SIDE EVENT AT THE 3RD INTERNATIONAL CONFERENCE ON FINANCING FOR DEVELOPMENT, ADDIS ABABA, ETHIOPIA
Unlocking Transformative Financing for Renewable
Energy and Climate Resilience in Africa
From Evidence to Widespread Replication
Venue: Africa Hall, Congo Building, ECA Compound Date: 14 July 2015
Time: 18:00 – 20:00 hrs
A dialogue to help frame a replicable policy and regulatory framework blueprint to unlock and catalyze public private partnerships, domestic resources, foreign direct investment and climate finance for renewable energy in support of sustainable and inclusive development in Africa post-2015
Speakers include:
Carlos Lopes Executive Secretary
United Nations Economic Commission for Africa
Achim Steiner Executive Director
United Nations Environment Programme
Adnan Z. Amin Director-General
International Renewable Energy Agency
Hela Cheikhrouhou Executive Director
Green Climate Fund
Jacques Moineville Deputy Director General
Agence Française de Développement
Solomon Asamoah Vice-President
Infrastructure, Private Sector & Regional Integration
African Development Bank
Magnus Asbjornsson Regional Director
Middle East & Africa, Reykjavik Geothermal Limited
Andrew Norton Director
International Institute for Environment & Development
Simon Zadek Co-Director
UNEP Inquiry IPP Office
Lena Mangondo Head, Legal, IPP Office
Department of Energy of South Africa
Organized by the African Climate Policy Centre (ACPC) of the United Nations Economic Commission for Africa. The ACPC is supported by
Africa Climate Talks (ACT!)
3-5 Sept 2015
Dar es Salaam, Tanzania
1-3 Oct 2015
Dakar, Senegal
www.climdev-africa.org/cop21
Fifth Climate Change and Development in
Africa (CCDA-V) conference
28-30 Oct 2015
Victoria Falls, Zimbabwe
www.climdev-africa.org/ccda5
A Side Event of the Economic Commission for Africa
Unlocking Transformative Financing for Renewable
Energy and Climate Resilience in Africa:
From Evidence to Widespread Replication
Africa Hall, Congo Building, ECATuesday 14 July 2015
6–8 p.m.
Specifically, the event aims to identify lessons learned when designing appropriate policy, regulatory frameworks, incentive mechanisms and climate resilience for enhanced renewable energy deployment, drawing on experiences from across the continent and globally. The event will address the role that climate finance could play in the effort to mobilise foreign and domestic private sector and public investments to finance sus-tainable development in Africa. Africa’s huge natural resource base can be fully optimised through a green industrialization pathway that addresses poverty issues and ensures food, energy and water security, thereby guaranteeing inclusive growth and prosperity and thus contributing to the attainment of Africa’s Agenda 2063.
4. SESSION DESIGN AND PARTICIPATION
The event will begin with opening remarks from the Executive Secretary of the Economic Commission for Africa, the Execu-tive Director of the United Nations Environment Programme and the Director-General of the International Renewable En-ergy Agency. The remarks will be followed by presentations which will frame the subsequent panel discussion.
At the end of the panel discussions, the discussants will pro-vide a synopsis of the key messages as well as new issues emerg-ing from the discussion.
The session will conclude with a closing statement that out-lines the way forward for transformative financing for renew-able energy deployment and climate resilience in Africa.
5. EXPECTED OUTCOMES
The expected outcome of the event is an enhanced under-standing on how to frame a blueprint on policy and regulatory frameworks to support and attract investments for low-carbon climate-resilient development in Africa beyond 2015.
13-16 JULY 2015 ADDIS ABABA ETHIOPIA
About ClimDev-Africa
The ClimDev-Africa Programme is an initiative of the African Union Commission, the Economic Commission for Africa and the African Development Bank. It is mandated at the highest level by African leaders (African Union Summit of Heads of State and Government). The Programme was established to create a solid foundation for Africa’s response to climate change, and works closely with other African and non-African institutions and partners specialized in climate and development.
ContactsAfrica Climate Policy Center
United Nations Economic Commission for AfricaMenelik II Road, PO Box 3001
Addis Ababa, [email protected]
Supported by
there is still an investment gap of over USD 50 billion per annum in order to ensure a transformative low-carbon, cli-mate-resilient and socially inclusive energy future.
Having the right policy instruments, incentive mechanisms and regulatory frameworks in place to establish markets, as well as appropriately designed risk mitigation measures are essential requirements to attract the huge private and pub-lic sector investments needed to unleash the potential of the continent’s renewable energy resources. Furthermore, the risks and challenges posed by climate change have to date not been integrated into investments in energy infrastructure; yet, these investments need to be calibrated to the potential risks posed by climate change.
A number of African countries have embraced development options which can steer the continent towards blue and green economies. Some African countries, such as Ethiopia and South Africa, have already demonstrated how having the po-litical will to promote sustainable development, supported by enabling partnerships, policy and regulatory frameworks can readily mobilise and leverage domestic and foreign invest-ments in transformative low-carbon energy and climate resil-ient development. To assist other African countries towards replication of these successes, a number of questions need to be answered. For example:
• Whatistheframeworkforablueprintonthemeansofimplementation for inclusive green growth evolving from the experiences of these pioneering countries?
• Somecountrieshaveadoptedvariouspolicyinstrumentsto support investment in renewables, including feed-in tariffs and public tenders. Germany, one of the pioneers of feed-in tariffs, has now conducted a pilot on public tenders for its Energiewende (the energy transition). Should African countries be considering feed-in tariffs? If so, under which circumstances?
• WhatistheroleandnatureofthepartnershipsthatAf-
rican countries need to enhance and accelerate structural transformation for green and inclusive growth towards Agenda 2063 and within the context of the Sustainable Development Goals?
• CompellingscientificevidencesuggeststhatAfricawillbethe most affected region by climate change in spite of its limitedresponsibilityincausingit.Whatarethedesiredoutcomes of the post-2015 climate agreement that would compel developed nations to assist Africa overcome chal-lenges imposed by a changing climate?
• Whatspecialinstrumentsandresourcesshouldbemadeavailable to African Small Island Developing States (SIDS) who are particularly vulnerable to adverse impacts of climate change?
• Someprogresshasbeenmadeintheclimatenegotiationswith regards to climate finance, resulting in the establish-ment of multilateral climate finance mechanisms and in-struments such as the Adaptation Fund and the Green ClimateFund.Whatroleshouldthesemechanismsandinstruments play in leveraging the huge volume of private and public sector investments needed for low-carbon cli-mate-resilient development in Africa?
• Over the last three years, there has been tremendousgrowth in the capitalisation of green bonds.What op-tions exist to operationalise green bonds in Africa and how could flows from global green bonds be directed to finance green growth in Africa?
• Goingforward,whatspecificrolesshouldAfricangovern-ments, development partners and the private sector play to accelerate Africa’s leapfrogging of green growth?
3. OBJECTIVE
The side event aims to elaborate a framework blueprint for sus-tainable development in Africa by highlighting and promoting best practices for unleashing the huge investments needed to finance low-carbon, climate-resilient green and inclusive de-velopment in Africa beyond 2015.
1. ABSTRACT
The event aims to highlight experiences and evidence on the ground on mobilising transformative financing to invest in low-carbon climate-resilient development in Africa, building on lessons learned from countries such as South Africa and Ethiopia. The objective of the discussions is to frame a repli-cable blueprint that African countries can use to develop strat-egies for unlocking and catalysing public private partnerships, domestic resources, foreign direct investment and climate fi-nance for renewable energy deployment in support of sustain-able and inclusive development on the continent beyond 2015.
2. CONTEXT
The sustainable development goals to be adopted by world leaders in September 2015 embody a global vision of manag-ing social, economic and environmental systems in a sustain-able way to ensure wealth creation and enhanced human well-being, while addressing the impacts of climate change. This requires bold measures which include transformative change in policies and practices to promote decarbonisation of economic growth. Low-carbon climate-resilient development requires a paradigm shift that stimulates a governance architecture that promotes inclusive growth, equity and shared prosperity.
The dual dynamics of structural transformation and green growth in Africa speak exactly to this paradigm shift aimed at attaining sustainable development on the continent. For this to happen, access to modern energy forms and services and resilience to the shocks posed by climate change are essential. Renewable energy has a key role to play in this context. Yet, the continent’s huge and widely distributed renewable energy resources remain largely underinvested owing to a combina-tion of factors which include a lack of appropriate policy and regulatory frameworks to signal and stimulate investments. Although several billion dollars’ worth of investments have al-ready been deployed in various clean energy projects in Africa,
Unlocking Financing Renewable Energy and Climate Resilience in Africa
During the Third International Conference on Financing for Development that took place in Addis
Ababa from 13 to 16 July 2015, the Africa Climate Policy Centre (ACPC) organized a high level side
event on “Unlocking Transformative Financing for Renewable Energy and Climate Resilience in Africa:
From Evidence to Widespread Replication.”
The side event aimed to highlight experiences and evidence on the ground on mobilizing
transformative financing to invest in low-carbon, climate-resilient development in Africa, building on
lessons learned from renewable energy deployment in countries such as South Africa, Ethiopia and
Kenya, among others.
The objective of the discussion was to share strategies for unlocking and catalyzing public–private
partnerships, domestic resources, foreign direct investment and climate finance for renewable energy
deployment in support of sustainable and inclusive development on the continent.
Africa’s green energy sector has huge potential to power low-carbon economic growth, create jobs and provide universal access to safe and affordable energy. Delivering this would also support the Sustainable Development Goals’ (SDGs) call for sustainable management of the world’s natural resources while eliminating the factors that keep people poor, including lack of access to energy.
Despite its huge potential, Africa’s renewable energy sector remains heavily underinvested. Although several clean energy projects have attracted some significant investments, a funding gap of USD 50bn per year is still needed to unleash the sector’s potential. Lack of appropriate policy instruments, incentive mechanisms and regulation have been a major barrier in hindering the right conditions for investment. Other factors, such as failing to create measures to integrate climate change risk into energy investments have also stifled funding prospects.
The key messages and issues arising from the very rich discussion at the event included:
The energy strategies adopted by African countries are fundamental to how the continent responds to climate change while transforming its economies for inclusive green growth.
Given the continent’s rich endowments and for potential renewable power, the current 22% share of installed capacity in Africa is low. More African countries need to take immediate steps now and put in place appropriate policy and regulatory frameworks to accelerate the uptake of renewables on the continent.
Africa’s rich and variedly distributed renewable energy resources provide an opportunity for energy security on the continent through socially inclusive energy corridors and interconnected power systems that optimize the continent’s energy resources in favour of higher shares of renewables. The continents’ energy deficit must therefore be addressed at all scales from standalone home and off-grid systems to large scale interconnected power grids.
Policy coherence, certainty and clarity are essential for investor confidence to ensure that transformative deployment of renewable energy takes off in Africa, as demonstrated by oversubscription of South Africa’s recent round of the Renewable Energy Independent Power Producer Procurement Programme.
Structuring the energy market by governments must be integral to national development plans and will only have tangible results by scaling up across the continent.
It is vital that administrative and policy bottlenecks are removed to reduce high project transaction costs and reduce the project pipeline on the continent.
Local financial resource mobilization can play a key role in the deployment of renewable energy and climate resilience projects on the continent as demonstrated by the experiences in South Africa and Ethiopia to date.
Although feed-in tariffs have played catalytic roles in attracting investments in renewable energy projects, public tenders are having a more transformative impact, resulting in falling prices and value for money.
The cost of capital for projects in Africa, typically at 15-20% compared to 6-12% in OECD countries is too high - partially attributable to a high level of perceived risks. Reducing this risk level will help accelerate renewable projects on the continent. The Green Climate Fund and other sources of funds could provide pivotal instruments for mitigating these risks. In this regard, development banks and DFIs need to put the “D” in development finance and cease to operate on a similar basis as commercial banks by taking on higher risk.
Countries need to urgently address the severe lack of capacity to develop bankable projects, and strengthen the capacities and financial health of national utilities to make them bankable and ready to engage with investors.
In closing the energy deficit in Africa sufficient attention must be paid to mobilizing substantial investments for sustainable bioenergy development, especially in the context of the energy, food, climate, and land nexus.
The eminent panel of business leaders, representatives of international financial institutions, UN agencies and think tanks included: Carlos Lopez, Executive Secretary, UNECA; Achim Steiner, Executive Director, UNEP; Henning Wuester, Director, Knowledge, Policy & Finance Centre, IRENA; Hela Cheikhrouhou, Executive Director, Green Climate Fund; Solomon Asamoah, Vice President, Infrastructure, Private Sector & Regional Integration, AfDB; Magnus Asbjornsson, Regional Director, Middle East and Africa, Reykjavik Geothermal Limited; Jacques Moineville Deputy Director General, Agence Française de Développement; Andrew Norton, Director, IIED; and Simon Zadek, Co-Director of the UNEP Inquiry into the Design of a Sustainable Financial System.
Issued by: ClimDev-Africa
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